Stryker has capacity for more buys; ‘actively looking across our portfolios’
Stryker [NYSE:SYK], the Kalamazoo, Michigan-based medical technology company, has the financial capability and desire to pursue further acquisitions, according to CEO Kevin Lobo.
On Tuesday’s 4Q16 earnings call, Stifel analyst Rick Wise asked if Stryker was less likely to pursue M&A in 2017 due to its share repurchase and recent acquisitions of Sage Products and Physio-Control International.
“You should definitely not read that in to it,” Lobo replied, noting that the company’s USD 250m buyback was a modest sum. “We continue to be actively looking across our portfolios for acquisitions and we have the financial capacity to do more deals.”
The CEO said Stryker might pursue further share repurchases if deals did not materialize, adding that its capital allocation philosophy had not changed from before the Sage and Physio transactions.
“We have the capacity and the willingness to do more deals,” he added. “Certainly, Medical had a terrific year organically, while integrating two big acquisitions, but our other divisions all have bandwidth to be able to take on acquisitions.”
Stryker offers products and services in three main business divisions: Orthopaedics; Medical and Surgical; and Neurotechnology and Spine.
The company announced in February last year its agreement to buy Washington-based Physio, a portfolio company of Bain Capital that provides monitors/defibrillators, automated external defibrillators and CPR-assist devices, for USD 1.28bn. Earlier that month, Stryker said it had agreed to purchase Sage, an Illinois-based medical supplies manufacturer, from Madison Dearborn Partners for USD 2.775bn.
In addition to these two large acquisitions, Stryker made several much smaller buys in 2016. While the company has been consistenly active on the M&A front over the past decade, last year was its most active in terms of both acquisition spend and number of notable deals.
JPMorgan and Sullivan & Cromwell advised Stryker on the Sage deal, while Skadden, Arps, Slate, Meagher & Flom was used for Physio. Both law firms have been used on a number of other deals in the last 10 years. Covington & Burling, Baker & McKenzie and various in-country law firms have also been used on occasion.
Stryker reported cash and marketable securities of USD 3.4bn and total debt at year end of USD 6.9bn. The company has a market capitalization of USD 45.4bn.